THOMPSON V. FIRST NATIONAL BANK OF TOLEDO, 111 U. S. 529 (1884)

U.S. Supreme Court

Thompson v. First National Bank of Toledo, 111 U.S. 529 (1884)

Thompson v. First National Bank of Toledo

Submitted April 22, 1884

Decided May 5, 1884

111 U.S. 529

Syllabus

A person sued as a partner, and whose name is shown to have been signed by another person to the articles of partnership, may prove that before the articles were signed or the partnership began business, he instructed that person that he would not be a partner. chanroblesvirtualawlibrarychanroblesvirtualawlibrary

An exception cannot be sustained to the exclusion of evidence which is not shown by the bill of exceptions to have been material.

A person who is not actually a partner and who has no interest in the partnership cannot, by reason of having held himself out to the world as a partner, be held liable as such on a contract made by the partnership with one who had no knowledge of the holding out.

This action was brought by the First National Bank of Toledo, Ohio, a national banking association established at Toledo, against William H. Standley, William H. Whiteside, Josephus Atkinson, Edward R. Thompson, and Joseph Uhl, as partners in the business of private bankers at Logansport, Indiana, under the name of the People's Bank, upon a draft for $5,000, drawn and accepted by the partnership on August 25, 1877, payable in ninety days after date to the order of the plaintiff's cashier and taken by the plaintiff in renewal of a like draft discounted by it for the partnership on May 5, 1877.

Thompson filed a separate answer, denying that he was a member of the partnership or liable to the plaintiff on the draft sued on. He died pending the suit, and it was revived against his administrators.

Upon a trial by jury, the plaintiff introduced evidence tending to show that about April 10, 1871, a partnership known as the People's Bank was formed at Logansport for the purpose of carrying on a private banking business there for one year, and the articles of partnership were reduced to writing and signed by Standley, Whiteside, Atkinson, Uhl, and others in their own names, and in Thompson's name by Whiteside, who was his son-in-law and cashier of the partnership; that none of the partners other than Thompson and Whiteside were acquainted with the business of banking; that late in the previous winter or early in the spring, Thompson, who resided at Delaware, Ohio, was at Logansport engaged in promoting the scheme of forming the partnership, and urged Uhl to take stock in it to the amount of $2,000, and, for the purpose of inducing Uhl to do so, agreed himself to take an equal amount of stock, and represented that he had had experience in such a banking partnership, and that it was a moneymaking institution, chanroblesvirtualawlibrarychanroblesvirtualawlibrary

that he was worth about $75,000, and would make Uhl safe if he would join them in forming the partnership, and that he wished to establish it, and Whiteside was to be its cashier; that Uhl, who was a man of means, then agreed to take the same amount of stock as Thompson; that thereupon Thompson, in the presence of Uhl, Standley, and others, authorized Whiteside to sign his name to the partnership, and to act for him in the organization of the bank; that the partnership entered upon the business of banking at Logansport with Whiteside as its cashier, and that about April 1, 1872, some of the partners sold out their interests to other members of the firm, and new articles of partnership were executed, to which Thompson's name was subscribed by Whiteside, but that Thompson was not present on either occasion when his name was subscribed to the articles. The testimony introduced by the plaintiff also tended to show that before the bank commenced business, Whiteside caused to be printed blank checks, certificates of deposit, and advertising circulars bearing the names of the partners and of Thompson as one of them, which were used in the business of the bank; that from the time until 1876, advertisements were published by Whiteside's direction in a newspaper of Logansport stating that the partnership was engaged in the business of banking, the names of the partners, and of Thompson as one of them, and that all the persons so named were individually liable for the debts of the partnership; that the fact that Thompson was so advertised as a partner was brought to his knowledge, and he admitted the truth of the published statement; that he at different times during this period, in conversation with the partners and with third persons, admitted that he was a partner and that he had received dividends upon his shares in the partnership, and on two or three occasions, when in the banking house, was introduced as a director and stockholder in the partnership, and did not deny the fact; that the partnership carried on the banking business at Logansport under the same name from its original formation until August 25, 1877, when it failed in business and its assets passed into the hands of a receiver, and that all its members except Uhl chanroblesvirtualawlibrarychanroblesvirtualawlibrary

and Thompson were insolvent, and that the plaintiff began to do business with the partnership in October, 1873, and continued to do so until its failure.

The bill of exceptions, after stating the evidence introduced by the plaintiff, added:

"But no testimony was given showing that the plaintiff or any of its officers had knowledge during said period as to the persons who constituted said partnership, or of said advertisements published in the papers of Logansport as aforesaid, or of the fact that the name of Thompson appeared upon such checks and certificates of deposit or in said circulars as aforesaid as one of said partners, or that the plaintiff, or any of its officers, servants, or agents had knowledge of said conversations with Thompson concerning his said alleged connection with said firm or of any of said alleged statements by him relative to said matters, or that said Thompson had ever held himself out to the plaintiff as a member of said firm."

The defendants introduced evidence tending to contradict the evidence introduced by the plaintiff and to show that although Thompson, before the partnership was formed, had a conversation with those who afterwards became partners on the subject of forming a partnership for banking, he never authorized Whiteside to sign his name to the partnership articles or to act for him in the organization of the bank, and never agreed to take stock in or paid any money into the partnership, or participated in its proceedings, or received any dividends, or knew that his name was used in the checks, certificates of deposit, circulars, or advertisements of the partnership; that his name nowhere appeared on the books of the partnership except on the stock book; that after the checks and certificates of deposit first printed had been used up, new ones were printof the partnership except on the stock book; that after the checks and certificates of deposit first printed had been used up, new ones were printof the partnership except on the stock book; that after the checks and certificates of deposit first printed had been used up, new ones were printed on which his name did not appear and others on which none of the names of the partners appeared; that just before the partnership commenced business, Thompson received a letter from Whiteside enclosing a form of assignment from him to Whiteside of the stock in the partnership for which Whiteside had subscribed in Thompson's name, and that Thompson, after adding the words, "which chanroblesvirtualawlibrarychanroblesvirtualawlibrary

you took for me," signed the assignment and enclosed it in a letter to Whiteside which Whiteside received and shortly afterwards posted in the stock book at the place where Thompson's name appeared, and that Whiteside, when he signed Thompson's name to the articles, expected that Thompson would take the stock so subscribed for, and upon his failure to do so procured the assignment aforesaid and himself paid in the capital which he had agreed that Thompson should pay in and himself received the dividends which would have gone to Thompson.

The defendant offered to prove by the testimony of Whiteside and his wife, that Thompson after the time when the evidence for the plaintiff tended to show that he authorized Whiteside to sign his name and to take stock for him as a partner, and before any partnership articles were signed or the partnership commenced business, instructed Whiteside that he would not become a partner therein. The defendants also introduced evidence that Thompson's letter enclosing the assignment aforesaid had been lost after being received by Whiteside, and offered to prove its contents. But the court declined to permit the defendants to prove either of these matters and excluded the testimony so offered, and the defendants excepted to each of the rulings.

After the testimony had been closed, the defendants requested the court to instruct the jury that

"if they found from the testimony that Thompson was not in fact a member of said partnership, the plaintiff could not recover unless it further appeared from the testimony that Thompson had knowingly permitted himself to be held out as a partner and that the plaintiff had knowledge thereof during its transactions with said partnership."

The court refused to instruct the jury as requested, and instructed them that the first question for them to determine was whether Thompson was a partner in the firm on August 25, 1877, and if they found he was, they need not go further, but might upon that finding return a verdict for the plaintiff, and that if they found he was not a partner, it was for them to determine whether he had held himself out and permitted chanroblesvirtualawlibrarychanroblesvirtualawlibrary

the officers of the bank to hold him out to the world as a partner in the business, and upon this branch of the case instructed them, among other things, as follows:

"The defendants' counsel insist that no recovery can be had on this ground unless the plaintiff shows by the evidence upon the trial of the cause that he gave credit to the bank, looking to the defendant as a part of it; in other words, that the credit was extended in part to the defendant Thompson. We entertain a different opinion. It is not necessary for the plaintiff to show here that at the time it discounted the acceptance sued on, it especially relied upon the defendant Thompson for its payment. If Thompson had held himself out to the world in this public manner, through these advertisements and the other means brought to your attention, as an interested party, as liable for the obligations of the bank, the plaintiff is entitled to the benefit of that fact, without showing that it knew that Thompson was a partner in the bank or without showing that it specially gave credit to this particular defendant. This publication is of such a character as to entitle the plaintiff to rely upon it, without such proof as the defendants' counsel insist ought to be made here -- that is, that the plaintiff knew of these advertisements, etc., and relied upon Thompson for the payment of this debt. If he was not at any time a partner, but still permitted the officers of said bank to hold him out, by advertisements and otherwise, as shown in the evidence, and permitted himself to be introduced as a director and stockholder, as is shown by the evidence -- if he permitted that to be done, then, as between him and third parties such as the plaintiff, he is estopped from denying his liability as a partner."

The jury returned a general verdict for the plaintiff, upon which judgment was rendered. The defendants, having duly excepted to the refusal to instruct as requested and to each of the instructions above quoted, sued out this writ of error.

The errors assigned were 1st, the exclusion of the evidence of Whiteside and wife, 2d, the exclusion of the evidence of the contents of Thompson's letter to Whiteside, 3d, the refusal chanroblesvirtualawlibrarychanroblesvirtualawlibrary